Protecting Veterans from Predatory Lending Act of 2018

Mr. Speaker, I thank the gentleman for yielding.

Mr. Speaker, I rise to urge passage of my bill, H.R. 6737, the Protect Affordable Mortgages for Veterans Act, which is bipartisan legislation that passed the committee with a unanimous vote of 49-0.

This legislation would provide a technical fix so that recently issued loans refinanced by the Department of Veterans Affairs can remain eligible for the secondary market.

This fix is essential to prevent a liquidity crisis in the veterans home loan market and ensure that the brave men and women who have served our Nation in uniform have access to affordable mortgages.

Through passage of this bill, we can ensure that VA home loans are not adversely impacted by issues in the veterans mortgage market created by the unintended consequences of S. 2155.

The Economic Growth, Regulatory Relief, and Consumer Protection Act, S. 2155, contained some very important bipartisan reforms to protect veterans from predatory lending and deceptive marketing. These provisions of S. 2155 are now the law of the land and essential to protect the VA home market. But unclear timelines laid out in the legislation and the way the Government National Mortgage Association, also known as Ginnie Mae, chose to implement the requirements of the new law have left an estimated 2,500 or more VA home loans boxed out of the secondary market.

These mortgages are now considered orphan loans, because they are no longer eligible for Ginnie Mae securitization, even though they met all Federal requirements and are backed by the VA.

My bill would prevent a government-triggered liquidity crisis in the VA mortgage market by fixing this problem and restoring eligibility for these orphan loans.

Addressing this ensures that veteran homeowners or prospective home buyers who have earned access to the VA home loan program through their military service aren't harmed by a fluke in S. 2155.

Without this bill, potential damage to the overall VA home loan market is

likely because VA lenders may have to sell or finance these orphan mortgages at a loss. This would have a negative impact on the brave men and women who have served our country and deserve a path to homeownership and the American Dream.

If lenders aren't able to securitize VA home loans through Ginnie Mae, closing costs and borrowing costs could go up and opportunities to borrow or refinance could go down.

Mr. Speaker, veterans have some of the lowest default and foreclosure rates in the Nation, and they have earned access to VA home loans through their selfless service to our country.

As I mentioned earlier, it is estimated that 2,500 or more VA home loans that were issued earlier in May or June of this year may now be boxed out of the market due to a minuscule legislative error. Even one VA home loan negatively impacted by a minor mistake is one too many when it comes to giving our veterans access to homeownership.

That is why we must pass this bipartisan bill. I thank my lead bipartisan cosponsors, Claudia Tenney of New York and Kyrsten Sinema of Arizona. I also thank Chairman Hensarling, Ranking Member Waters, and Housing and Insurance Subcommittee Chairman Sean Duffy for supporting this important bipartisan reform.

I also thank the great staff of the House Financial Services Committee for all their help throughout this process. They certainly have shown a tremendous amount of care and compassion for our Nation's veterans with this bill and so many others.

Mr. Speaker, I include in the Record a letter from Senator Tillis and Senator Warren expressing the need to address the issue of these orphan VA loans. I urge adoption of this important bipartisan bill.

U.S. Senate,

Washington, DC, June 11, 2018.

J. Paul Compton, Jr.,

General Counsel, U.S. Department of Housing and Urban

Development, Washington, DC.

Dear Mr. Compton: As you know, S. 2304--the Protecting

Veterans from Predatory Lending Act of 2018 (Act)--was

introduced and subsequently included in S. 2155, the Economic

Growth, Regulatory Relief, and Consumer Protection Act, which

President Trump signed into law on May 24, 2018. The Act was

introduced to protect veterans from targeted predatory home

loan practices by requiring lenders to demonstrate a material

benefit to consumers when refinancing their mortgage. As

such, the legislation included: (1) a fee recoupment

requirement; (2) a net tangible benefit test; and (3) a loan

seasoning requirement.

The aforementioned actions and subsequent signature of the

president were taken after witnessing some bad actors in the

U.S. Department of Veterans Affairs (VA) Home Loan space

engage in the practice of ``churning''--the refinancing of a

home loan over and over again to generate fees and profits

for lenders at the expense of the consumer and taxpayers.

Upon enactment of the legislation, questions arose

surrounding whether Ginnie Mae (Ginnie) is statutorily

authorized to continue to accept previously guaranteed Ginnie

Mortgage-Backed Securities (MBS) as eligible multiclass

securities collateral under its multiclass securities

programs, given the requirements of the legislation--i.e. the

MBS are backed by a refinanced loan that is guaranteed by the

VA benefit program and do not meet the conditions required by

the Act.

Specifically, the Act requires that to be included as

eligible collateral for a Ginnie guaranteed MBS, a VA

refinance loan must be refinanced after the later of: (1) the

date that is 210 days after the date on which the first

monthly payment is made on the mortgage being refinanced, and

(2) the date on which six full monthly payments have been

made on the mortgage being refinanced. To implement the Act,

Ginnie revised its MBS pooling eligibility requirements and

amended its MBS Guide to specify how Ginnie MBS are affected

by this Act. Ginnie delineated that securities with an

issuance date of May 1, 2018 or earlier are unaffected even

if they do not meet the conditions of the Act, and that

Ginnie securities with an issuance dated June 1, 2018 or

later will comply with the new pooling requirements and

conditions of the Act. Ginnie also determined that given the

above-mentioned congressional reasons for enacting S. 2155,

there was never an intent by Congress to impact Ginnie's

ability to continue to guaranty multiclass securities that

are collateralized by Ginnie MBS guaranteed prior to the

enactment of the Act that may contain VA guaranteed

refinanced loans that do not meet the requirements of the

Act.

We recognize that there are a small number of loans that do

not conform with the Act's requirements that were either

originated or in the process of being originated before the

May 31st date of Ginnie's APM regarding new seasoning

requirements. It was not our intention to ``orphan'' those

loans, and we urge Ginnie and the VA to work with lenders and

other federal agencies to attempt to ensure that those loans

are not adversely affected by the enactment of the Act.

We support the steps that Ginnie has taken, and look

forward to working with Ginnie and the VA to further protect

veterans from loan ``churning.''

Sincerely,

Thom Tillis,

United States Senate.

Elizabeth Warren,

United States Senate.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, earlier this year, when Congress passed S. 2155, it included a section 309, a bill sponsored by Senators Tillis and Warren, entitled the ``Protecting Veterans from Predatory Lending Act of 2018.'' That provision put new requirements in place to protect veteran borrowers from aggressive and deceptive marketing tactics of lenders pushing mortgage refinance deals.

One of the new requirements included was a loan seasoning requirement that mandated a certain period of time before a VA borrower could refinance their loan. This new requirement was very similar to the loan seasoning requirement that Ginnie Mae had already implemented administratively prior to the passage of this law.

However, slight differences between the old and new requirements, and the immediate ban on securitization of loans that did not meet the new requirements, resulted in an estimated 2,500 loans that were boxed out of Ginnie Mae securitization simply because they were in the process of being refinanced or securitized when the law became effective.

The sponsors of the legislation, Senators Warren and Tillis, have weighed in with Ginnie Mae, stating that it was not their intention to orphan these loans, and they have urged Ginnie Mae to address the issue. However, Ginnie Mae believes legislation is needed.

I believe H.R. 6737 is a reasonable attempt to address what was clearly an unintended consequence of previous legislation, and I am pleased to support this bill.

Mr. Speaker, I ask for a ``yes'' vote. I support the bill and urge my colleagues to support it, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 6737) to amend the Economic Growth, Regulatory Relief, and Consumer Protection Act to clarify seasoning requirements for certain refinanced mortgage loans, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days to revise and extend their remarks and include extraneous materials on this bill.

Mr. Speaker, I yield 5 minutes to the gentleman from New York (Mr. Zeldin).

Mr. Speaker, I yield back the balance of my time.